Connor Company Strategy: Advance Managerial Accounting

The Connor Company manufactures a specialized piece of manufacturing equipment. Its machine has always been distinct from its competitors' machines and is considered to be superior to their products, too. However, its competitors are catching up both in terms of features and quality. Connor has refined its manufacturing to the point that it never produces defective machines, relying on well-trained workers and highly-complex manufacturing equipment. Without these workers and this equipment, Connor would have a difficult time producing its products without defects. Since a large amount of materials are wasted in production, however, one of its goals is to reduce the amount of direct materials used to produce the machines. Given the unique and specialized nature of the machines, Connor often needs to provide a significant amount of support to its customers.

a) Based on this information, what type of strategy to you believe Connor is pursuing? Be sure to back up your claim with specific evidence.

b) List and justify eight metrics (2 in each of the Balanced Scorecard perspectives) that you believe Connor should include in its Balanced Scorecard.

c) Connor calculates the following figures:

2011 operating income $2,700,000
2012 operating income $3,319,500
Growth component $280,000
Price-recovery component $247,500
Productivity component $92,000

In 2012, Connor sold more units and charged a higher price than in 2011. Connor also paid more for raw materials in 2012 than it did in 2011.

Based on this information, do you believe Connor's increase in operating income in 2012 is consistent with its goals and strategy? Be sure to justify your answer with specific information.